Isabel Luna, 8, shows her Tinkerbell inspired bedroom in her family's San Pablo, Calif., home on Sunday, February 19, 2012. Her father, Oscar Luna, is a delivery driver for BiRite Foodservice Distributors. He moved out of the city to San Pablo about a year ago after he and his wife had their second child and they couldn't afford a larger place in San Francisco. less

Isabel Luna, 8, shows her Tinkerbell inspired bedroom in her family's San Pablo, Calif., home on Sunday, February 19, 2012. Her father, Oscar Luna, is a delivery driver for BiRite Foodservice Distributors. He ... more

Photo: Carlos Avila Gonzalez, The Chronicle

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Oscar Luna, right, and his wife, Lucia, play with their year-old daughter, Sofia in their San Pablo, Calif., home on Sunday, February 19, 2012, as their daughter, Isabel, 8, does her homework. Luna is a delivery driver for BiRite Foodservice Distributors. He moved out of the city to San Pablo about a year ago after he and his wife had their second child and they couldn't afford a larger place in San Francisco. less

Oscar Luna, right, and his wife, Lucia, play with their year-old daughter, Sofia in their San Pablo, Calif., home on Sunday, February 19, 2012, as their daughter, Isabel, 8, does her homework. Luna is a ... more

Photo: Carlos Avila Gonzalez, The Chronicle

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Oscar Luna takes his family's dogs back to the garage after the family spent some time in their back yard of their San Pablo, Calif., home on Sunday, February 19, 2012. Luna is a delivery driver for BiRite Foodservice Distributors. He moved out of the city to San Pablo about a year ago after he and his wife had their second child and they couldn't afford a larger place in San Francisco. They are shown in their San Pablo, Calif, home on Sunday, February 19, 2012. less

Oscar Luna takes his family's dogs back to the garage after the family spent some time in their back yard of their San Pablo, Calif., home on Sunday, February 19, 2012. Luna is a delivery driver for BiRite ... more

Photo: Carlos Avila Gonzalez, The Chronicle

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The Luna family plays with their dogs on the home's deck on Sunday, February 19, 2012. Oscar Luna is a delivery driver for BiRite Foodservice Distributors. He moved out of the city to San Pablo about a year ago after he and his wife had their second child and they couldn't afford a larger place in San Francisco. They are shown in their San Pablo, Calif, home on Sunday, February 19, 2012. less

The Luna family plays with their dogs on the home's deck on Sunday, February 19, 2012. Oscar Luna is a delivery driver for BiRite Foodservice Distributors. He moved out of the city to San Pablo about a year ago ... more

Photo: Carlos Avila Gonzalez, The Chronicle

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Sofia Luna, 1, runs to her father Oscar, in their San Pablo, Calif., home on Sunday, February 19, 2012. Oscar Luna is a delivery driver for BiRite Foodservice Distributors. He moved out of the city to San Pablo about a year ago after he and his wife had their second child and they couldn't afford a larger place in San Francisco. less

Sofia Luna, 1, runs to her father Oscar, in their San Pablo, Calif., home on Sunday, February 19, 2012. Oscar Luna is a delivery driver for BiRite Foodservice Distributors. He moved out of the city to San Pablo ... more

Photo: Carlos Avila Gonzalez, The Chronicle

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Oscar Luna and his family play with their dogs on the deck of their home in San Pablo, Calif., on Sunday, February 19, 2012. Luna is a delivery driver for BiRite Foodservice Distributors. He moved out of the city to San Pablo about a year ago after he and his wife had their second child and they couldn't afford a larger place in San Francisco. less

Oscar Luna and his family play with their dogs on the deck of their home in San Pablo, Calif., on Sunday, February 19, 2012. Luna is a delivery driver for BiRite Foodservice Distributors. He moved out of the ... more

Photo: Carlos Avila Gonzalez, The Chronicle

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S.F. tries to make homes affordable to middle class

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Oscar Luna didn't want to leave the city where he'd spent the past 20 years, but after his wife gave birth to their second child a little over a year ago, the family outgrew the studio they rented in San Francisco's Bernal Heights neighborhood.

They found nothing in the city big enough to buy or rent that they could afford on his $64,000 annual salary as a delivery driver for BiRite Foodservice Distributors, Luna said.

"It was really hard for me to leave my city," said Luna, 42, who now lives in San Pablo. "San Pablo is not very good, but the price is good."

Stories like his aren't new for San Francisco, but some city officials once again hope to change that.

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Middle-class households have been fleeing the city for years. Over the past decade, there has been a steady decline in lower-middle- and moderate-income earners - those making between $36,000 and $85,000 as a one-person household or from $51,000 to $122,000 for a family of four - while the percentage of wealthy and very low earners has increased, according to a joint report issued last week by Mayor Ed Lee's office and the city controller.

Now, Lee wants to tackle two housing problems at once: boosting the number of middle-income homes while also sustaining efforts to create low-income housing after the single biggest source of such affordable homes was eliminated Feb. 1 when the state dissolved redevelopment agencies.

The mayor has convened a group of sometimes oppositional figures in the housing realm, from Calvin Welch, the longtime affordable housing advocate, to Oz Erickson, chairman of Emerald Fund developers, to find ideas to create a $50 million-per-year revenue stream to help make housing available to low- and middle-income workers. The mayor is aiming to have a proposal on the November ballot.

Welch and Erickson were on opposing sides of the city's last major ballot-box battle over middle-class housing in 2004, when voters crushed Proposition J, the Workforce Housing Initiative, which the city's political left called a stealth plan to build mostly high-end condominiums.

Rivals at the same table

Now the two are at the same table as Lee returns to the consensus playbook he used to get a public worker pension reform measure written and then passed in November.

It was standing room only earlier this month at City Hall when 54 people arrived for the first meeting to create what the mayor is calling the "Housing Trust Fund," according to documents and attendees.

The press was barred, but participants said the substance of the proposals has yet to be fleshed out.

Lee initially suggested that part of the $50 million a year could come from increasing the transfer tax paid when property is sold, but a senior adviser said there are now about eight different revenue sources, from new taxes to diverting existing funds, that could be used.

"We're not tied to the idea that a transfer tax is necessary," said Malcolm Yeung, Lee's housing policy adviser. "The mayor has been crystal clear: All ideas are on the table."

Some of those include growing the subsidy pie while increasing the production of market-rate housing, which generates fees for affordable homes and increases supply. Others include streamlining regulations, shortening the entitlement process and building units without parking, which are cheaper to produce.

The mayor knows the problem can't be fixed quickly, staff said.

There are currently 56,000 low-income households in San Francisco, according to the recent joint report on housing. One idea, giving each one a down payment subsidy of $75,000, would cost the city $4.2 billion . By comparison, the entire city budget is $6.8 billion.

Increasing the supply of housing to decrease prices a comparable amount would require adding 100,000 new units, equivalent to all the new housing the city has constructed since the 1920s, the report said.

While the city has approved more than 35,000 new housing units in recent years - the bulk of it at planned developments at Hunters Point, Parkmerced and Treasure Island - there is no guarantee all of those will actually be built.

"We're dealing with a very, very large problem," Yeung said. "Our goal is to create programs and a stream of funding that can ... just expand opportunities for folks, basically across the spectrum."

Lee's top policy priority, increasing the number of jobs in the city, could adversely affect affordable housing by creating higher demand for homes from people who come to fill those jobs.

"He knows that housing is a key component to not only keep our residents housed, but to attract businesses," Falvey said. Supervisor Scott Wiener, who last week convened a hearing on middle-income housing, called it "one of the hardest issues we grapple with as a city."

What is 'middle class'?

Part of the problem is defining "middle class." The mayor's office sees it ranging from a one-person household earning between $35,500 and $107,000 a year to a family of six making between $59,000 and $177,000. Wiener said the middle-income focus should be on "moderate" wage earners: individuals making between $57,000 and $85,000 a year, or families of four earning $81,000 to $122,000.

At a recent Board of Supervisors committee hearing, some affordable housing advocates warned against putting more emphasis on the middle class.

"Long before it affected the middle-income folks, poor and working-class people were struggling to stay in this city," said Tommi Avicolli Mecca of the Housing Rights Committee of San Francisco. "How are we going to take on a whole new category of people - middle-income folks - when we have yet to meet the needs of the neediest here in San Francisco?"

Only about 20 percent of the city's affordable housing programs are currently geared toward moderate earners, Lee told the board during his "question time" appearance last week. Lee said that figure was "impressive" because the city gets no outside matching funds for middle-income housing, but gets a 2-to-1 match for low-income projects.

Whether he can marshal the political backing to address affordable housing across much of the income spectrum remains to be seen.

"Unfortunately, there are some folks who think we should never even talk about middle-income housing because they think it will somehow undermine low-income housing," Wiener said. "That's just not true. The two are not mutually exclusive."